2010

​The consequences of increases in the scale of tax and transfer programs are assessed in the context of a model with idiosyncratic productivity shocks and incomplete markets. The effects are contrasted with those obtained in a stand-in household model featuring no idiosyncratic shocks and complete markets. The main finding is that the impact on hours remains very large, but the welfare consequences are very different. The analysis also suggests that tax and transfer policies have large effects on average labor productivity via selection effects on employment.

​The question whether a minimum rate of sick pay should be mandated is much debated. We study the effects of this kind of intervention with student subjects in an experimental laboratory setting rich enough to allow for moral hazard, adverse selection, and crowding out of good intentions. Both wages and replacement rates offered by competing employers are reciprocated by workers. However, replacement rates are only reciprocated as long as no minimum level is mandated. Although we observe adverse selection when workers have different exogenous probabilities for being absent from work, this does not lead to a market breakdown. In our experiment, mandating replacement rates actually leads to a higher voluntary provision of replacement rates by employers.

​This article studies dynamics in a model where agents forecast a one dimensional state variable via ordinary least squares regressions on the lagged values of the state variable. We study the stability properties of alternative transformations of the state variable, such as taking logarithms, which the agent can endogenously set forth. Surprisingly, for the considered class of economies, we found that the transformations that an econometrician would attempt are destabilizing, whereas alternative transformations, which an econometrician would never consider, such as convex transformations, are stabilizing. Therefore, we ironically find that in our set-up, an active agent who is concerned about learning the economy's dynamics and who in an attempt to improve forecasting transforms the state variable using standard transformations, is more likely to deviate from the steady state than a passive agent.

​This paper reports an experiment designed to shed light on an empirical puzzle observed by Dufwenberg and Gneezy (2000) that the size of the foregone outside option by the first mover does not affect the behavior of the second mover in a lost wallet game. Our conjecture was that the original protocol may not have made the size of the forgone outside option salient to second movers. Therefore, we change two features of the Dufwenberg and Gneezy protocol: (i) instead of the strategy method we implement a direct response method (sequential play) for the decision of the second mover; and (ii) we use paper money certificates that are passed between the subjects rather than having subjects write down numbers representing their decisions. We observe that our procedure yields qualitatively the same result as the Dufwenberg and Gneezy experiment, i.e., the second movers do not respond to the change in the outside option of the first movers.

5. Gutiérrez, E., "Using satellite imagery to measure the relationship between air quality and infant mortality: an empirical study for Mexico,"Population and Environment, 31 (2010): 203-222.

Abstract:

​This research uses a unique dataset that provides relatively inexpensive measures of air quality at detailed geography. The analytical focus is the relationship, in Mexico, between Aerosol Optical Depth (AOD, a measure of air quality obtained from satellite imagery) and infant mortality due to respiratory diseases from January, 2001 through December, 2006. The results contribute to existing literature on the relationship between air pollution and health outcomes by examining, for the first time, the relationship between these variables for the entire land area of Mexico, for most of which no ground measures of pollution concentrations exist. Substantive results suggest that changes in AOD have a significant impact on infant mortality due to respiratory diseases in municipalities in the three highest AOD quartiles in the country, providing evidence that air pollution’s adverse effects, although nonlinear, are not only present in large cities, but also in lower pollution settings which lack ground measures of pollution. Methodologically, it is argued that satellite-based imagery can be a valuable source of information for both researchers and policy makers when examining the consequences of pollution and/or the effectiveness of pollution-control mechanisms.

6. Juárez, L., "The Effect of an Old-Age Demogrant on the Labor Supply and Time Use of the Elderly and Non-Elderly in Mexico," B.E. Journal of Economic Analysis & Policy, 10 (2010): 48.

Abstract:

​This paper estimates the effect of a generous demogrant for individuals age 70 and older that started in 2001 in Mexico City on the labor supply and time use of beneficiaries and of non-elderly family members who live with them. Using a triple differences approach, I find that the program has no significant effect on the time use of eligible individuals, except for the sharp decrease in the housework participation of elderly women who live with another potential beneficiary. Individuals 60 to 69 years old change their time use only if they live with a potential beneficiary, but not because they expect to receive the demogrant themselves in a few years. In particular, men in their 60s seem to retire early if they live with someone who qualifies for the transfer. Both men and women 18 to 59 years old increase their labor supply if the live with an eligible individual, but decrease it if they live with an eligible woman. These results are consistent with income in the hands of elderly women being shared with younger family members, but not income in the hands of elderly men.